The sudden, unexpected departure of a skilled employee can devastate businesses that are unprepared for it. Their talent pool and knowledge base immediately diminish, while costs increase as they scramble to hire a replacement and maintain productivity. This vicious cycle can only be stopped by having a pipeline to fill open vacancies as they occur, a process otherwise known as succession planning.

What is succession planning?

Succession planning is how employers identify and develop internal talent to replace employees who take a leave of absence, resign or retire. Traditionally, it was reserved for grooming future chief executive officers (CEOs) and senior leadership, but that approach is no longer considered strategic. Many employers today extend succession planning to a broader base of employees throughout their organization.

Why should employers build a succession plan?

Admittedly, succession planning requires resources, but the alternative could be a talent crisis. Consider these points:

  • Finding a qualified candidate can take up to six weeks or longer
  • Locating candidates with a specialized skill can be incredibly challenging
  • Training an existing employee is generally less expensive than hiring a new one
  • Succession planning is easier than it sounds, thanks to technology

What is the succession planning process?

Businesses can prepare themselves for the departure of an employee and prevent talent and knowledge gaps by following these steps:

  1. Create a strategic roadmap that outlines the company’s talent goals and the responsible parties.
  2. Write detailed job descriptions that can help match talent with the tasks required for the positions.
  3. Use workforce projections to determine which current and future positions need to be filled.
  4. Identify competencies for each job so that employees understand performance expectations.
  5. Promote employee growth with lunch and learns, job shadowing, cross-training and mentorship programs.
  6. Measure success using relevant metrics, i.e., retention rates, time to fill, percentage of vacancies filled by the talent pool, etc.

Benefits of succession planning

By strategically identifying and developing high-potential employees for future roles within their organization, employers may be able to:

  • Maintain productivity
  • Preserve organizational knowledge
  • Retain valued team members
  • Improve employee engagement
  • Reduce recruitment and hiring expenses

Common mistakes made during succession planning

One of the most common mistakes made during succession planning is not planning enough or at all. Employers who have gotten a late start should prioritize workforce development and may need to rehire retirees as part-time staff or contractual workers in the interim.

Succession planning best practices

Expanding a succession plan to include many employees other than senior leaders can be challenging. Here’s how to make the process smoother:

  • Use talent management technology to guide strategic decisions about succession.
  • Ensure that employees with high potential have the support resources and training opportunities they need to be effective in their future position.
  • Be transparent with potential successors so they can have a say in the next phase of their career, but also be discreet to avoid creating workplace tension.
  • Conduct exit interviews and periodic engagement surveys to determine what makes employees leave or stay with the organization.
  • Sponsor a retirement plan so employees can feel comfortable retiring from the organization when the time is right.

Frequently asked questions about succession planning

What are the five levels of succession planning?

  1. Outline goals and stakeholder responsibilities
  2. Write detailed job descriptions to help match talent with required tasks
  3. Set performance expectations by identifying job competencies
  4. Give potential successors the training and education they need
  5. Determine the metrics that will be used to measure success

What is an example of succession planning?

Family-owned businesses that transfer ownership from one generation to the next are prime examples of succession planning. Simply assuming a child or relative will one day take the reins does not ensure the organization's survival. The transition requires strategic conversations, training and thorough preparation.

What succession planning tools are available to employers?

When planning potential successors for critical positions, employers often use talent management technology to identify:

  • Departments within the organization with high turnover
  • Employees who may be at risk of leaving
  • Employees who have high potential for succession
  • Skills and experience necessary for each current and future role

Who is responsible for succession planning?

Depending on the organization’s size, succession planning may be conducted by business owners, senior leaders or HR professionals. But no matter who takes the lead, it’s usually a good idea to make potential successors part of the process to ensure they are comfortable with their future roles and have ample development opportunities.

How much does succession planning cost?

Succession planning is usually less expensive than replacing an employee, which can cost as much as the individual’s annual pay. This estimation accounts for the cumulative expenses of recruitment, training and lost productivity that occur when an individual abruptly leaves an organization.

This article is intended to be used as a starting point in analyzing succession planning and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.